Microsoft (MSFT)
Down around 18% this past month, we have rated Microsoft stock Buy because in our opinion this is the best stock of the entire Magnificent 7 right now. Like Apple, Amazon, and Alphabet, Microsoft has highly diversified revenue streams that each bring in significant cash flows – with the majority of it’s revenue coming from 6 sources (Azure, Office, Windows, Gaming, LinkedIn, and Bing). And unlike the rest of the Mag 7, Microsoft has the longest dividend history with the highest average dividend yield. While its embrace and overall exposure to AI does introduce risk, Microsoft has plenty of good use cases for current AI capabilities should the technology not live up to the promised hype. Even at in its current state, AI technology can be incredibly helpful in Copilot at the very least – and at best, Microsoft currently has the largest share of AI-backed cloud computing service (something very high on CEO priority lists right now). Additionally, Microsoft’s office services have a massive market share and exit barrier, with a plethora of companies tied into its office ecosystem. MSFT stock has a reasonable valuation at a 26 PE, particularly given its high earnings growth forecasts. They’ve beat all 4 of their last earnings calls, and analysts have rated Microsoft a Strong Buy with an average one year forecast of +32%. We have put them as low risk, medium reward and have rated it a Strong Buy with a +17% one year forecast.
